Mar 17, 2023, 09:15 ET
RENO, Nev., March 17, 2023 /PRNewswire/ -- In the wake of numerous bank closures, Aspen Alpha Advisors (AAA) encourages investors to look to the life settlements space to offer some peace of mind for a portion of their portfolio. Recent events at Silicon Valley Bank and Signature Bank have illuminated the liquidity risk investors face when banks invest in long-term Treasury bonds. Due to rising interest rates over the past year, what began in 2021 as relatively low-risk investments became riskier, bonds lost some of their value, and as depositors began to pull cash out, the combined events led to a liquidity crisis. When comparing the safety factor of investments in banks versus insurance, life insurance companies tend to have higher capital requirements and stricter rules on how their money is invested on behalf of their policyholders.
"As investment managers, we can never say that there is no risk involved - there is always a risk," says Jordon Trice, managing partner at AAA. "But what we can say is: no legitimate life insurance policy has ever not been paid."
A life settlement is the legal sale of an existing life insurance policy to a third party. The owner of the policy sells their life insurance policy to a life settlement provider in exchange for cash. Selling a life insurance policy is a legal, worthwhile option for those who no longer need their policy. More often than not, these policy owners are senior citizens looking to sell their policies to help pay for long-term healthcare costs or end-of-life expenses.
"Life settlements offer historically steady growth and a very low correlation with fluctuations in the market or pricing volatility when interest rates increase," shares Trice. "We tell our investors that life settlements offer bond-like returns, without the duration risk of bonds you encounter when investing in longer-term treasuries."
The most successful life settlement funds perform well because they have a policy procurement strategy that supports the return investors expect from the asset class. Without proper knowledge of the industry, investors can easily end up buying policies that may have little to no return. By investing in a fund structure, investors get the benefit of the team, knowledge, and time in the industry as well as the potential profit.
"Right now, people are scared of more banks collapsing. Instead of pulling money out and placing it in even bigger banks, we encourage investors to take another look at life settlements," says Trice. "Since we are working in insurance, we don't see the volatility of assets typical investment funds encounter. Historically, life settlements have been a steady producer for investors. It also tends to fluctuate slowly either up or down. This is in stark contrast to how quickly things can go south when banks hold large amounts of long-dated treasuries as we have seen with Silicon Valley Bank. This can translate into peace of mind for the investor that wants to take on risk but doesn't have the stomach for big market swings."
Aspen Alpha Advisors manages life settlement funds for investors who are interested in diversifying their portfolios. To learn more about life settlements and opportunities available, visit aspenalphaadvisors.com.
Media Contact: Dana Reynolds
Email: [email protected]
SOURCE Aspen Alpha Advisors
Share this article